Global Conflicts Are Becoming a Housing Market Risk

Added: 2026-05-09

[00:00:03][music] [music] >> Hello there. I'm Steven Thomas with Reports on Housing coming to you on Friday, May 8th with another Housing Debrief. This week we're sponsored by Andriana Filando at JMJ Financial, the Tibeto Merrell Group, and we're going to dive in today to global conflicts are becoming a housing market risk. And oh, by the way, I if you've seen our channel and or you just stumbled upon it, I invite you to like this video and also subscribe to our channel. I always forget to say that until the very end.

[00:00:45]So, I'm going to say that up front. And it just helps out and everybody get in the overall real truth of what's going on in the housing market and where are we headed? We're all about setting expectations. We do things a little bit differently here. We're not throwing around narratives. We're talking about the the implications of various economic events on on housing, as well as uh you know, no no no no puff. We're not trying to puff up the market and we're not doomers either. We're kind of like uh tell it like it is. So, anyways, uh there have been some geopolitical shocks. The biggest ones were Ukraine and Russia. That was in 2022. And this this year and then we kind of had tariffs as well because it was kind of like this tariff war. Uh that was last year and were uh global implications to that. This year we've got the Iran conflict that has been a major geopolitical event. And what happens and if you could dial all the way back to COVID, which is not really a geopolitical, but there it definitely had its its uh it its global impacts. And what happens when the when these big giant breaking stories come out, uh these kind of conflicts tariffs or or uh anything that is is a giant change in what we have been doing and the way things are going to be done, it there's a market shock.

[00:02:08]And we can see it in in uh the financial markets, and you can see it with consumers as well. Sometimes they hold off big spending items like cars as well as houses. But uh our attention span as Americans, it begins to it it wanes uh after that uh the Iran conflict started.

[00:02:27]It's getting to the point right now, everybody knows where the uh where where Iran is located, everybody knows uh a lot about the the uh strait there. They know everything about uh gasoline and its implications to the at the pump right now. But after after a while, we kind of get used to the the latest uh news on it, and it's rolling news. It continues, and it's kind of like the same thing over and over again.

[00:02:52]And when we have that, ultimately what uh ends up happening is it wanes, and we divert our attention from all that news to going on with our lives. And you could actually see that with uh with in regards to buyers in the housing market, that they've they that they're beginning to uh turn their attention back to housing. And um I'll tell you where we were at before this Iran conflict, and I've shown this chart over and over again because we were at 7% interest rates, and that's what basically this shows. We were at 7% interest rates back in April of last year and May of last year, and then over time it made its way all the way down to 6%, and that's where we have uh that's where we're hanging the week before we went into the Iran conflict. It was it was just a few days before, and then we hit that weekend, and that's when the Iran conflict started. And then uh and I want everybody to understand that uh that uh on the job front, the week later after the Iran conflict started on jobs.

[00:03:54]And this is very important to understand because the Fed closely watches jobs and prices. That is their main objective, their dual mandate. And you could see what happened to jobs that following Friday, there was a big drop in the number of jobs created in manufacturing is -92,000. And then ultimately, it it was actually uh over the following month, it went down there was a revision where it was down even more. So, over 100,000 negative for the month. Now, what would have happened is we were already at 6% interest rates.

[00:04:31]It would have fallen into the fives. And the fives we have not been there since August of 2022 with any kind of duration. And here we are in May, just a few short months away, it'll be 48 months ago. So, 4 years ago, August of 2026, which is just right around the corner, that we've been stuck above 6%, 6% and above. Matter of fact, for most of that time it's been between 6 and 1/2 and 7 and 1/2, occasionally a little bit below 6 and 1/2, occasionally all the way up to 8%. And that that would have come if we didn't have the Iran conflict, we would have got that jobs report. And then what we would have seen is 5% rates, like 5.85% or right around there is what we surmise. At that point, we would have actually seen a really big boost to overall spring market. And but then along came the Iran conflict conflict and the closing of the Strait of Hormuz. And it's been stuck, it's been barricaded, Iran has barricaded it, stopped vessels from going through, and now the United States has a has their naval force on the other side as well. So, this has basically come down to it's stopped and we're getting inching closer to a deal, but it sounds like we've been inching closer to a deal for the better part of the last several weeks. And but I'm going to show you what's happened to the to the data. And I'm only going to show you Southern California because when we get the national data, by the time we get it, it is so old that I'm going to give you we do reports and we follow data really closely across the United States, but it's not it's not as current. It takes a little longer to get it. And but if you get the kind of data that we get for our areas, we do all of Southern California Bay Area. We also have Sacramento. We do Phoenix and we do Vegas. So we have all these various areas. So we're able to see it and they're very doing all very very similar things. You could see this is the inventory for all of Southern California. And it's cumulative everything on the market for Southern California and you could see where it's at right now. It's actually just crossed underneath of last year. So there are fewer homes on the market than last year. And um where we would have gone is right here.

[00:06:46]We would have actually gone way underneath of where we are at right now and it would have slightly started to increase. And that's what all markets we saw. Instead, you can actually see the bump in inventory where it started to rise starting from about March 1st on the starting of the Iran conflict. And then instead where we are going is right along this line. So you could see it's it's a lot higher than where we would have been had the Iran conflict not started. So one of the implications actually across the United States is cuz we would have done more pending sales activity, inventory levels were going to go down. So we could see it in the numbers that all of a sudden there was this turn in the number of homes that were that were accumulating on the market. And you could see this in demand. This is recent pending sales.

[00:07:39]And what what do is we look at the recent pending sales and we're very following very very closely to August of 2000 I mean August of of 2024 pending sales numbers. That's demand. And you can see that's about where it's going to go. And we're going to follow those pending sales numbers of 2024 and it's going to closely resemble it. Right now where demand is at, it's actually peaked and is higher than where it's been prior and so we're we're getting kind of a little bit later peaks. We get it between April and May, but this is coming in May, so it's a little bit later. We're getting all of our numbers look better this week compared to last week compared to 2 weeks ago. So that that kind of indicates that we're approaching a peak in demand. It will remain elevated, but it will come down slightly. And but what we would have done, if you see where where we were headed, this is about March 1st, we would have actually finally thawed out and we would have had more demand than we've had the last several years. We're not talking where we were prior to the pandemic, a normal number of pending sales, that's 2017, 18, and 19, the green line, but it would have broken out and started to thaw compared to where we've been stuck for the last few years. Instead, we're following closely last year. So it's very very very similar over the last few few years. So and then as far as the speed of the market something we call expected market time. It takes into consideration both available number homes and the amount of pending sales activity demand over the last 30 days and we do some math on that and we have the true speed of the market. It's not days on market, it's way better. I started this in the 1990s because I just didn't like days on market and that's what the industry kind of hung their hat on. Not a fan of days on market.

[00:09:28]Instead, I like to know the true speed and how it changes. And you can see what's happening to the speed right now.

[00:09:33]So we actually have and hit a peak in demand and inventory is is not rising as fast as demand is over the last couple weeks. And so, as a result, we've seen this the expected market time drop, which means the market's actually getting speedier. And so, that's where we're at right now. And where we uh where we will continue to go from here is this will probably be a uh a recent low. It's not the lowest of the year, which occurred in February.

[00:10:00]It'll it'll slowly but surely increase over the course of the spring and into the early summer. And uh but where we would have gone is we would have seen a because we would have just got into the fives. If we would have just got into the fives in March, we would have seen a bump in demand. As well as we would have seen inventory levels come down. And when you have inventory levels that are coming down and demand that's rising, you could see that the overall speed of the market, expected market time, would have got a lot stronger. And it would have dropped uh pretty pretty decent.

[00:10:32]Wouldn't it wouldn't have dropped all the way to that 3-year average, but it would have been better than where we were last year when we accumulated a lot of homes on the market. And that was 2025. So, what it's definitely it's still speedier than where we were last year, but it would have been way speedier. And this is true across the United States. Now, each market's a little bit different, but overall cumulative cumulatively what we're seeing across the United States is an increase in pending sales activity and inventory levels that are getting less than where they were last year. So, as result, a bit speedier of a market than where we were a year ago. If you're trying to understand it and you're in the uh in the trenches, this is really what's going on. Now, there there is a a lot more market potential, and uh it's not meeting its potential because we've had rates that have gone up recently.

[00:11:23]So, um and then so you're wondering, where are we headed? The longer this Iran conflict goes on, where are we going to go? Which way are we going to go? It's kind of like ominous and a little bit dark and people don't quite understand where we're going to go, but we have we have a pretty good idea of how things are going to unfold from here.

[00:11:42]And but first I'd like to bring in our sponsor. Our sponsor is Andriana Filando Filando with JMJ Financial, the Thibodeau Morell Group, and she has a great program. It's home equity line of credit. They're they've got a great HELOC program. It's for debt consolidation, home renovation funds, need cash fast, couldn't get a HELOC from your bank. Uh it's also great for investors. And uh so and by the way, you can get instantaneous uh instantaneous uh quotes and uh it's done really fast. So, contact Andriana Filando at JMJ Financial. She can be reached at 310-418-6255.

[00:12:18]That's 310-418-6255.

[00:12:21]That's Andriana uh Filando with the Thibodeau Morell Group, JMJ Financial.

[00:12:27]So, thank you, Andriana, for your continued support. Now, where are we headed from here? That's the big uh question. And I'm going to re resort to a lot of our trends. So, we look at trends all the time and we just showed you how the trends have evolved in inventory, demand, and expected market time. But, what are some other implications that can further feed into uh what's going on? And uh it's not just about gas. Gas is something that definitely is an issue, but it's not just gasoline. And you could you could see this. This is most uh recent report that came out uh earlier this this week on the 4th, and you could see that uh that premium gasoline and regular gasoline, it's averaging as far as regular, it's now averaging $4.45 across the United States versus the highest that we got uh in 2022 was $5 a gallon.

[00:13:20]And we've been making our way up towards that. The longer this goes on, the more volatile it gets. And so, really that's what it ultimately boils down to. How long is this going to continue? The longer this goes, it's not like all of a sudden we're going to see going to a recession or something like that. That's just not how it works.

[00:13:38]Cuz there's a lot of people who are saying, "Yeah, recession right now."

[00:13:41]That's not quite how it works cuz you look at a lot of different economic factors, and employment has been really resilient. It actually employment numbers came out today for last month, the month of April, and it was a beat.

[00:13:52]It was higher than expectations. So was last last month, it was higher than expectations.

[00:13:57]But there are a lot of the labor force is shrinking. The it's actually shrunk quite a bit, and there so it's not all you know, roses out there. You have to you have to look underneath the hood and see the entire report to understand it.

[00:14:13]So, there are some surprises, but there are other things on there that we need to be concerned about and continue to watch. But, it's not just it's not just about that that labor, either. So, what's going to happen is GDP, the longer this goes on, the more that it's going to slow. And that's what we're going to see. Now, you need you need labor to actually crack and go negative for us to for the United States going to recession. However, the longer this goes, where we have elevated gasoline prices, and which is starting to hit other other areas, it will affect GDP. GDP is slowly but surely going to be less and less and less the longer this goes on. If this does not get resolved anytime soon, you could actually make an argument for eventually going into recession.

[00:15:00]But, it definitely is slowing down the overall economy. And usually when there's a slowdown in the economy, there's a safe haven. And the safe haven is typically Treasury bonds, like 10-year Treasuries. It's also mortgage-backed securities. And what I've just said has to do with interest rates. So, when everybody floods the market and that's their safe haven, we're talking investors, Wall Street, across the United States and around the world. What they do is they dump their money into more long-term issuances of stuff, rather than stock market.

[00:15:31]That's more overnight. Instead, they want long-term stuff. And that's just to to keep their money safe and to to diversify. And what happens when they do that all all the same time, rates actually come down. And so that's typically actually what happens during a recession is we get rates that come down. So, all mortgage rates we start to see better better mortgage rates. And that's because typically what happens is the Federal Reserve will have to cut a little bit more aggressively. So, the Federal Reserve, this is their beautiful building that they that they are housed out of in Washington, D.C. They have a dual mandate. I talked about it. It's maximum employment and price stability.

[00:16:09]Now, the issue with today is it's not it's there's an issue of inflation. So, we talked about the job market. It has been crumbling a little bit. We would have been into the fives, but a little bit more resilient of reports, but the reports underneath the hood actually show some weakness on the job front that that they need to really pay attention to. And so that's one side of their mandate. So, there they'd want to cut rates to and when I'm talking about cut rates, it's the overnight federal funds rate that they cut. It's not long-term rates. Long-term rates are are investors kind of how much they put into it is where rates end up going, but that tends to go where they think the Fed needs to go. So, but but so the job market weakening would make rates go down, but inflation going up, now in order to prevent prices from going out of control, what they ultimately do is they flood they start to to raise rates. So, they they raise the short-term federal funds rate. So, one on one side of the hand, they're doing jobs. So, jobs they they would they'd want to cut for that, but to keep prices at bay, they'd raise it. So, now you can see the problem. It's actually like a tug-of-war where they're not going to do anything. We were supposed to see a couple of one to two cuts in rates this year, but that's not quite how it's going to materialize. So, it's not just about the inflation of gasoline that where it costs you an arm and a leg, or if you have super unleaded, both. And these prices are the averages across the United States. Come here to California and you're looking at $6.50 a gallon for regular unleaded. So, the impact on inflation is not just on gas.

[00:17:48]We're seeing it with groceries will will start to rise. Fertilizer, everybody's heard about that. Airfare and travel, and then shipping costs will go up as well. So, these are a lot of different inputs into the economy, and if those if the prices start to rise, the output, what we pay, will actually go up, and that's inflationary. So, that's why they're not in the mood to cut right now. Even if we were going to get a a Kevin Warsh is going to be the new Federal Reserve president. He's going to be the new Federal Reserve chief. He's going to run things.

[00:18:21]He is not going to go in there and say cut, cut, cut. That's just not what's going to happen. So, instead, expect them to just keep things the the way that they are. And so, we were at these these rates right at 6%, and instead, what we've seen are rates rose, and rates rose on the backs of the fear of inflation going up, the oil prices going up, and as a result, the pulled the two cuts off the table, and that's what everybody in Wall Street and everybody agrees that we're not going to see a cut on rates anytime soon as long as this Iran conflict thing continues and we have an issue with inflation. So, if you're expecting rate cuts, that's not what's going to happen. We need to get past the Iran conflict, and the longer this goes, the more implications it has in the overall economy. And as long as we have rates that are above six, actually above about 6 and 1/4%, that's where we have more of a frozen housing market. It's been frozen the last few years, demand hasn't changed, inventory has risen a little bit more on the backs of more homeowners coming onto the market, but we actually have a few fewer homeowners coming on the market this year as a result. And demand recently went up. We have inventory levels that are actually a little bit less than last year. So, like I said, if you like this contact content, please like it, subscribe to our channel, go to reports on housing.com for more information. We have many of our other videos are housed there as well. As and we have other information, and you can sign up for one of our many reports in all of SoCal, the different reports, as well as the Bay Area, Phoenix, and Vegas.

[00:20:07]And our most recent report that came out is called One Market, A Spectrum of Speeds. It's not one size fits all for how fast the market is. There's difference between attached and detached and all the different price ranges. The more expensive a home is, the longer it takes to sell.

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[00:20:25]So, thank you for joining us for another housing debrief. We will see you on the other side.